10 Ways to Keep Your Remodeling Project on Budget

More than a million homes will undergo major renovation or remodeling this year, and while most homeowners will be pleased with the final product, one of the most common complaints is that it cost much more than they expected.

In 2005, homeowners spent $275 million remodeling their homes, according to the National Association of the Remodeling Industry. That trend shows no signs of slowing, as homeowners are not only spending cash to improve the inside of their homes, but growing numbers are also adding decks, patios, and outdoor rooms.

So how do you avoid going over budget by 20, 40, 60 percent or more? Use these time-tested tips to keep your remodeling project on budget.

Start with a realistic budget. If you think you're going to renovate your kitchen with cherry cabinets, granite countertops and a heated tile floor with enough lighting for an airport on $15,000, think again. If $15,000 is all you have to spend, then you must cut back on your wants, save more, or do more or all of the work yourself. A quality contractor should be able to show you exactly what that $15,000 can buy, then also provide options on what increasing the budget will get you.

Spend at least six months, and as much as two years, planning a major project. The more time you spend planning, the more likely the final project will meet your long-term needs. While initiating the major renovation a week after you decide to get started might solve your short-term needs, it will likely not meet your long-term needs. Plan the project carefully, examining your entire home to determine what is working and what might work over the long term. During this planning time, you'll likely come up with better ideas, and perhaps better materials that can meet both your budgetary constraints and provide good long-term value.

Talk things through with your significant other. Having an open and honest ongoing dialogue can help you design a project that can stand the test of time. It can get both of you on the same page, so one of you isn't telling the contractor one thing and the other something different. Contractors don't like surprises, and neither do spouses.

Talk to your friends, neighbors, and co-workers. You'll likely hear more horror stories than good advice (people are much more likely to repeat a bad experience than a good one), but you'll also likely pick up some good tips and design ideas than can take your project from ordinary to special, often without breaking the budget. For example, adding a heated floor in that master bath instead of a radiator (which could even save you money), or one brand of kitchen under cabinet lighting that uses less energy than another.

When getting bids from contractors, be open minded and listen to their suggestions. Even if you've spent a couple of years planning your project, a quality contractor can add value by suggesting changes to the design or materials that can add to the functionality of the project, and reduce its cost. Listen carefully to contractors during the bidding process – you may find that one has really listened to your ultimate goal, and is suggesting a new, better way to achieve that goal.

During the bidding process, make sure you are comparing apples to apples. That means the bid should spell out the quality of materials that will be used on the job. A quality tile kitchen floor is much more costly and durable than stick-on vinyl squares made to look like tile.

When you get down to selecting the contractor with whom you want to work, be sure the allowances are enough for the quality you seek. If your heart is set on that commercial-grade oven, and what is priced-in is the one on sale at the local appliance chain, that will cost you. Four inch oak crown molding and elaborate baseboard molding will add to the cost if only basic pine molding was specified. Spell out exactly what you want so that you don't continually add to the budget.

Resist the urge to get carried away with the "while you are here you might as well. . . " add on projects. Yes, when you have electricians, plumbers and carpenters in your house, it can be less costly in the long run to have them fix all of those nagging problems in your home, but it will add to the price. Here is one of the areas in which both contactors and homeowners can get frustrated. To keep themselves and their crews busy, contractors must carefully schedule jobs, and if you are adding 10, 20, or 30 percent more time to the job, that throws their schedule off. Homeowners are often surprised to learn the cost of these additional projects or change orders. These add-on projects can cost more per hour than the contracted portion of the job. Avoid sticker shock by getting a handle on what needs to get done – get it into the contract, and change that contract a little, if any.

Communicate often and well with your contractor. From your first meeting, you will likely sense whether you and a particular contractor have a good rapport. That is important, because the larger the job, the more often you will need to clearly communicate with that contractor, so that both of you expect the same end result. Communication also means a well-written contract, with clear-cut expectations from both sides.

OK, we've discussed taking your time to plan the project, selecting a quality contractor, resisting the urge to add to your project, but things do happen on the job. Rarely does a contractor do exactly what is spelled out in the contract. There will likely be changes, and hopefully those will be minimal. So how do you minimize the impact on your wallet when these changes occur? Offer good terms – perhaps cash – for these add-ons. That can minimize their cost, and perhaps make the job go quicker.